Exhibit 99.1
(FELCOR LODGING TRUST LOGO) FelCor Lodging Trust Incorporated
545 E. John Carpenter Freeway, Suite 1300
Irving, Texas 75062-3933
P 972.444.4900 F 972.444.4949
www.felcor.com NYSE: FCH
FOR IMMEDIATE RELEASE:
FELCOR REPORTS 2003 RESULTS
o JANUARY 2004 REVPAR INCREASES 1.8 PERCENT
IRVING, TEXAS...FEBRUARY 4, 2004 - FelCor Lodging Trust Incorporated
(NYSE: FCH), the nation's second largest hotel real estate investment trust
(REIT), today reported operating results for the fourth quarter and year ended
December 31, 2003.
FOURTH QUARTER RESULTS:
FelCor's fourth quarter revenues from continuing operations were $292
million in both 2003 and 2002. The Company's fourth quarter hotel portfolio
revenue per available room (RevPAR) from continuing operations declined 1.7
percent, compared to fourth quarter of 2002. For the quarter, occupancy
increased 0.6 percent, to 58.6 percent, and hotel average daily rate (ADR)
decreased 2.3 percent, to $94.02, compared to the same quarter in 2002. For the
two most recent consecutive quarters, FelCor's hotel portfolio had occupancy
improvement, compared to the same periods in the prior year.
The decline in RevPAR and its effects on revenues during 2003 was
offset by the inclusion in revenues of $5 million from consolidating the
Interstate Hotels & Resorts joint venture and the operating results of its eight
hotels that were accounted for by the equity method until June 2003.
The operating margin from continuing operations of FelCor's hotels
during the fourth quarter 2003 was 25.1 percent, which represents a 310 basis
point decrease compared to the same period of 2002. The continued deterioration
in operating margins principally resulted from the $2.22, or 2.3 percent,
decline in ADR, partially offset by slightly higher occupancies. In addition,
health and workers compensation insurance put additional pressure on FelCor's
operating margins, compared to the same period in 2002.
FelCor's net loss applicable to common stockholders for the fourth
quarter of 2003 was $150 million, or a net loss of $2.55 per share. This is
compared to the prior year fourth quarter net loss of $185 million, or $3.17 per
share. The fourth quarter 2003 loss included an impairment loss of $123 million,
or $1.99 per share. The fourth quarter loss in 2002 included an impairment loss
of $158 million and a $3 million charge-off of deferred debt costs, which had a
combined $161 million, or $2.60 per share impact.
In accordance with the Securities and Exchange Commission's (SEC)
guidance on non-GAAP financial measures, Funds From Operations (FFO) and
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) have not
been adjusted to add back the impairment charges and the charge-off of deferred
debt costs. Accompanying this press release is a discussion of the non-GAAP
financial measures, FFO and EBITDA, and a reconciliation of these measures to
the Company's net loss.
FFO for the fourth quarter of 2003 was a loss of $128 million, compared
to the fourth quarter of 2002 loss of $154 million. FFO per share for the fourth
quarter of 2003 was a loss of $2.06 (including a $1.99 per share impairment
loss), compared to a FFO per share loss of $2.49 during the same period of 2002
(including $2.60 per share resulting from an impairment loss and the charge-off
of deferred debt costs).
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 2
EBITDA for fourth quarter 2003 reflected a loss of $76 million
(including a $123 million impairment loss), compared to a 2002 fourth quarter
EBITDA loss of $103 million (including $161 million related to an impairment
loss and the charge-off of deferred debt costs).
The fourth quarter 2003 operating results (before impairment losses)
were consistent with the low end of the Company's previously provided guidance
of an FFO loss of $0.07 per share and EBITDA of $47 million.
Consistent with FelCor's strategic objective to improve its portfolio
quality, the Company identified seven additional hotels for sale during the
fourth quarter of 2003. The fourth quarter 2003 impairment charge principally
resulted from FelCor's decision to sell these non-strategic hotels and reflects
the difference between book value and the estimated current fair market value of
these hotels.
Of the Company's 161 consolidated hotels, 35 hotels (including two in
discontinued operations) have been identified as non-strategic. FelCor expects
to sell these non-strategic hotels over the next 24 months with sales proceeds
expected to be approximately $250 million. During 2003, the Company disposed of
16 non-strategic hotels and has designated two hotels as held for sale. The
operating results of these 18 hotels are included in discontinued operations for
2003 and 2002. Disposition proceeds from the 16 non-strategic hotels and two
parking garages sold during 2003 totaled approximately $125 million.
"We continue to focus on our strategy to sell non-strategic hotels in
our portfolio and on future acquisitions in low supply-growth markets," said
Thomas J. Corcoran, Jr., FelCor's President and CEO. "We believe the worst is
over following three tough years for our industry. We are optimistic that we are
in the early stages of a recovery and that the positive signs will continue and
pricing power will return. FelCor is well positioned for the recovery."
FULL YEAR 2003 RESULTS:
FelCor's revenues from continuing operations for the full year 2003
were $1.2 billion, which reflected a decline of 3.4 percent, compared to 2002.
The decline in revenue principally resulted from a 4.4 percent decline in hotel
portfolio RevPAR, compared to full year 2002. Occupancy decreased 0.6 percent,
to 62.4 percent, and ADR decreased 3.8 percent, to $94.92, compared to 2002.
The revenue decrease related to the RevPAR decline during 2003 was
partially offset by $13 million of increased revenues from consolidating the
Interstate Hotels & Resorts joint venture and the operating results of its eight
hotels in June 2003, that were accounted for by the equity method, and the added
revenues of two hotels acquired in the third quarter of 2002.
The operating margin from continuing operations of FelCor's hotels
during 2003 was 28.9 percent, this represents a 380 basis point decrease
compared to 2002. The 2003 decrease in operating margin principally resulted
from the $3.78, or 3.8 percent decline in ADR during the year. In addition,
health and workers compensation insurance, and energy costs, put additional
pressure on FelCor's operating margins, compared to 2002.
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 3
FelCor's net loss applicable to common stockholders for 2003 was $337
million, or a net loss of $5.75 per share. This is compared to the prior year
net loss of $205 million, or $3.78 per share. The loss in 2003 included net
charges of $245 million, or $3.95 per share, resulting from an impairment loss
of $244 million, a charge-off of deferred debt costs of $3 million and a gain on
early extinguishment of debt of $2 million. The loss in 2002 included net
charges of $162 million, or $2.63 per share, resulting from an impairment loss
of $158 million, a $3 million charge-off of deferred debt costs, and $2 million
of abandoned project costs.
In accordance with the SEC's guidance on non-GAAP financial measures,
FFO and EBITDA have not been adjusted to add back the impairment charges, the
charge-off of deferred debt costs, abandoned project costs or the gain on early
extinguishment of debt.
FFO for 2003 was a loss of $207 million, compared to the 2002 loss of
$60 million. FFO per share for 2003 was a loss of $3.35 (including $3.95 per
share resulting from impairment losses, charge-off of deferred debt costs and
gain on early extinguishment of debt), compared to an FFO per share loss of
$0.97 during the same period of 2002 (including $2.63 per share resulting from
impairment losses, charge-off of deferred debt costs and abandoned project
costs).
EBITDA for 2003 reflected a loss of $3 million (including net charges
of $245 million resulting from impairment losses, charge-off of deferred debt
costs and gain on early extinguishment of debt), compared to a 2002 EBITDA of
$144 million (including net charges of $162 million resulting from impairment
losses, charge-off of deferred debt costs and abandoned project costs).
The impairment losses in 2003 and 2002 principally resulted from the
Company's decision to sell non-strategic hotels and reflect the difference
between book value and the current estimated fair market value of these hotels.
After the completion of a comprehensive review of FelCor's investment strategy
and its portfolio, the Company refined its investment strategy and decided to
sell smaller hotels in secondary and tertiary markets, emphasize the acquisition
of hotels in the upper upscale segment in low supply growth markets, and better
diversify its portfolio by geographic market and brand.
The 33 non-strategic hotels, included in continuing operations,
represent 20 percent of the rooms in FelCor's hotel portfolio, but less than
nine percent of FelCor's consolidated hotel operating profit. The 2003 operating
margin for these 33 non-strategic hotels was 17.9 percent, compared to 30.6
percent for the core portfolio.
CAPITAL STRUCTURE:
At December 31, 2003, FelCor had $246 million in cash and cash
equivalents and $2.04 billion of debt outstanding. FelCor had no outstanding
borrowings under its secured debt facility, under which it currently has $174
million of available borrowing capacity, or its $50 million unsecured line of
credit. The weighted average life of FelCor's debt is five years. During 2004,
debt maturities total $175 million, and there will be $17 million of additional
recurring principal payments.
"Our liquidity position is strong, with excess cash and available
capacity under our secured debt facility, which more than covers FelCor's
October 2004 senior note maturity," said Richard J. O'Brien, FelCor's Executive
Vice President and Chief Financial Officer. "In addition, the Company has four
hotels under sale contracts, with hard money deposits, and we anticipate $30
million in sales proceeds over the next 90 days."
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 4
2004 GUIDANCE:
For the first quarter of 2004, FelCor currently anticipates its
portfolio RevPAR will be 1.5 to 2.5 percent above the comparable period of the
prior year. The Company expects to realize proceeds from the sale of
approximately $30 million related to four non-strategic hotels with hard money
deposits. FelCor's RevPAR for the month of January increased approximately 1.8
percent, compared to January of 2003. FelCor currently anticipates that for the
full year 2004:
o Hotel portfolio RevPAR will increase approximately three to
four percent.
o Operating margins will have a flow-through in 2004 of 1.4 to
1.6 times.
o It will realize a third-quarter development gain of
approximately $8 million upon the completion and sale of a
251-unit residential condominium development project known as
"Margate," in Myrtle Beach, South Carolina.
o Its capital expenditures will be within the range of $75 to
$100 million.
o FFO per share will be within the range of $0.76 to $0.86 per
share and EBITDA will be within the range of $249 to $255
million, excluding any transaction gains or losses.
FelCor has published its Supplemental Information for the Three Months
and Year Ended December 31, 2003, which provides additional corporate data,
financial highlights and portfolio statistical data. Investors are encouraged to
access the Supplemental Information on the Company's website at www.felcor.com,
on its Investor Relations page in the "Financial Reports" section. The
Supplemental Information also will be furnished upon request. Requests may be
made by e-mail to information@felcor.com or by writing to the Director of
Investor Relations, FelCor Lodging Trust Incorporated, 545 E. John Carpenter
Freeway, Suite 1300, Irving, Texas, 75062.
FelCor is the nation's second largest lodging REIT and the largest
owner of full service, all-suite hotels. FelCor's consolidated portfolio is
comprised of 161 hotels, located in 33 states and Canada. FelCor owns 71
upscale, all-suite hotels, and is the owner of the largest number of Embassy
Suites Hotels(R) and Doubletree Guest Suites(R) hotels in the U.S. FelCor's
portfolio also includes 77 hotels in the upscale and full service segments.
FelCor has a current market capitalization of approximately $3.1 billion.
Additional information can be found on the Company's Web site at www.felcor.com.
FelCor invites you to listen to its fourth quarter 2003 conference
call on Thursday, February 5, 2004, at 10:00 a.m. (Central Standard Time). The
conference call will be webcast simultaneously via FelCor's website at
www.felcor.com. Interested investors and other parties who wish to access the
call should go to FelCor's website and click on the conference call microphone
icon on either the Investor Relations or FelCor News pages. In addition, a phone
replay will be available from Thursday, February 5, 2004, at 12:00 p.m. (Central
Standard Time), through Friday, February 28, 2004, at 7:00 p.m. (Central
Standard Time), by dialing 416-695-5795 (access code is 2041). A recording of
the call also will be archived and available at www.felcor.com.
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 5
With the exception of historical information, the matters discussed in
this news release include "forward looking statements" within the meaning of the
federal securities laws. Forward looking statements are not guarantees of future
performance. Numerous risks and uncertainties, and the occurrence of future
events, may cause actual results to differ materially from those currently
anticipated. General economic conditions, including the timing and magnitude of
the currently expected recovery in the economy, the realization of anticipated
job growth, the impact of U.S. military involvement in the Middle East and
elsewhere, future acts of terrorism, the impact on the travel industry of
increased security precautions, the availability of capital, the ability to
effect sales of non-strategic hotels at anticipated prices, and numerous other
factors may affect future results, performance and achievements. Certain of
these risks and uncertainties are described in greater detail in our filings
with the Securities and Exchange Commission. Although we believe our current
expectations to be based upon reasonable assumptions, we can give no assurance
that our expectations will be attained or that actual results will not differ
materially.
<Table>
<Caption>
Contact:
Thomas J. Corcoran, Jr., President and CEO (972) 444-4901 tcorcoran@felcor.com
Richard J. O'Brien, Executive Vice President and CFO (972) 444-4932 robrien@felcor.com
Monica L. Hildebrand, Vice President of Communications (972) 444-4917 mhildebrand@felcor.com
Stephen A. Schafer, Director of Investor Relations (972) 444-4912 sschafer@felcor.com
</Table>
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 6
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<Table>
<Caption>
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31,
---------------------------- ----------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues:
Hotel operating revenue:
Room ................................................ $ 224,646 $ 223,382 $ 947,254 $ 979,830
Food and beverage ................................... 52,162 53,007 188,582 195,991
Other operating departments ......................... 14,927 15,402 63,003 64,718
Retail space rental and other revenue ................. 148 195 1,022 1,646
----------- ----------- ----------- -----------
Total revenues .................................. $ 291,883 $ 291,986 $ 1,199,861 $ 1,242,185
----------- ----------- ----------- -----------
Expenses:
Hotel departmental expenses:
Room ................................................ 64,700 60,156 255,102 249,120
Food and beverage ................................... 41,390 40,868 150,975 153,123
Other operating departments ......................... 7,355 7,492 30,011 29,913
Other property related costs .......................... 89,677 85,651 353,293 339,811
Management and franchise fees ......................... 15,322 15,215 63,113 63,350
Taxes, insurance and lease expense .................... 28,564 29,605 125,328 127,279
Abandoned projects .................................... -- -- -- 1,663
Corporate expenses .................................... 3,808 3,463 14,266 13,756
Depreciation .......................................... 31,037 35,902 134,883 143,978
----------- ----------- ----------- -----------
Total operating expenses ........................ 281,853 278,352 1,126,971 1,121,993
----------- ----------- ----------- -----------
Operating income ........................................ 10,030 13,634 72,890 120,192
Interest expense, net ................................. (42,026) (40,385) (165,314) (162,786)
Charge-off of debt related costs ...................... -- (3,222) (2,834) (3,222)
Gain on early extinguishment of debt .................. -- -- 331 --
Impairment loss ....................................... (124,686) (70,168) (224,583) (70,168)
----------- ----------- ----------- -----------
Loss before equity in income from
unconsolidated entities, minority interests and
gain on sale of assets ............................. (156,682) (100,141) (319,510) (115,984)
Equity in income from unconsolidated entities ......... 118 (13,943) 2,370 (10,127)
Gain on sale of assets ................................ 178 -- 284 5,861
Minority interests .................................... 10,266 6,086 19,908 8,861
----------- ----------- ----------- -----------
Loss from continuing operations ......................... (146,120) (107,998) (296,948) (111,389)
Discontinued operations ............................... 3,187 (70,358) (13,196) (67,192)
----------- ----------- ----------- -----------
Net loss ................................................. (142,933) (178,356) (310,144) (178,581)
Preferred dividends ................................... (6,727) (6,727) (26,908) (26,292)
----------- ----------- ----------- -----------
Net loss applicable to common stockholders ............... $ (149,660) $ (185,083) $ (337,052) $ (204,873)
=========== =========== =========== ===========
Basic and diluted per common share data:
Net loss from continuing operations ................... $ (2.60) $ (1.96) $ (5.52) $ (2.54)
=========== =========== =========== ===========
Net loss .............................................. $ (2.55) $ (3.17) $ (5.75) $ (3.78)
=========== =========== =========== ===========
Weighted average common shares outstanding ............ 58,801 58,450 58,657 54,173
=========== =========== =========== ===========
</Table>
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 7
DISCONTINUED OPERATIONS
(in thousands)
Condensed financial information for the 18 hotels included in discontinued
operations is as follows:
<Table>
<Caption>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------- ----------------------
2003 2002 2003 2002
-------- -------- -------- --------
Hotel operating revenue .......................... $ 4,693 $ 17,855 $ 58,206 $ 75,774
Hotel operating expenses ......................... 4,303 17,870 54,314 71,502
-------- -------- -------- --------
Operating income ................................. 390 (15) 3,892 4,272
Direct interest costs, net ....................... -- (364) (498) (1,508)
Impairment loss .................................. (297) (73,917) (20,926) (73,917)
Gain on the early extinguishment of debt ......... -- -- 1,280 --
Gain on disposition .............................. 3,258 -- 2,376 200
Minority interest ................................ (164) 3,938 680 3,761
-------- -------- -------- --------
Income (loss) from discontinued operations ....... $ 3,187 $(70,358) $(13,196) $(67,192)
======== ======== ======== ========
</Table>
SELECTED BALANCE SHEET DATA
(in thousands)
<Table>
<Caption>
DECEMBER 31,
----------------------------
2003 2002
----------- -----------
Investment in hotels ..................................... $ 3,989,964 $ 4,255,618
Accumulated depreciation ................................. (886,168) (782,166)
----------- -----------
Investment in hotels, net of accumulated depreciation .... $ 3,103,796 $ 3,473,452
=========== ===========
Total cash and cash equivalents .......................... $ 246,036 $ 66,542
=========== ===========
Total assets ............................................. $ 3,590,893 $ 3,780,363
=========== ===========
Total debt ............................................... $ 2,037,355 $ 1,877,134
=========== ===========
Total stockholders' equity ............................... $ 1,296,272 $ 1,616,817
=========== ===========
</Table>
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 8
RECONCILIATION OF NET LOSS TO FFO
(in thousands, except per share data)
<Table>
<Caption>
THREE MONTHS ENDED DECEMBER 31,
--------------------------------------------------------------------------------
2003 2002
------------------------------------- -------------------------------------
PER SHARE PER SHARE
DOLLARS SHARES AMOUNT DOLLARS SHARES AMOUNT
--------- ------ --------- --------- ------ ---------
NET LOSS ..................................... $(142,933) 58,801 $ (2.43) $(178,356) 58,450 $ (3.05)
Depreciation from continuing operations ... 31,037 0.58 35,902 0.61
Depreciation from unconsolidated
entities and discontinued operations ... 2,153 0.04 5,699 0.10
Gain on sale of assets .................... (3,444) (0.06) -- --
Preferred dividends ....................... (6,727) (0.12) (6,727) (0.12)
Minority interest in FelCor LP ............ (7,712) 3,050 (0.07) (10,358) 3,290 (0.03)
--------- ------ --------- --------- ------ ---------
FFO .......................................... $(127,626) 61,851 $ (2.06) $(153,840) 61,740 $ (2.49)
========= ====== ========= ========= ====== =========
</Table>
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
2003 2002
------------------------------------- -------------------------------------
PER SHARE PER SHARE
DOLLARS SHARES AMOUNT DOLLARS SHARES AMOUNT
--------- -------- --------- --------- -------- ---------
NET LOSS ..................................... $(310,144) 58,657 $ (5.29) $(178,581) 54,173 $ (3.29)
Depreciation from continuing operations ... 134,883 2.30 143,978 2.66
Depreciation from unconsolidated
entities and discontinued operations ... 15,152 0.26 20,455 0.38
Gain on sale of assets .................... (2,668) (0.05) (5,861) (0.11)
Preferred dividends ....................... (26,908) (0.46) (26,292) (0.49)
Minority interest in FelCor LP ............ (17,777) 3,188 (0.11) (13,717) 7,564 (0.12)
--------- -------- --------- --------- -------- ---------
FFO .......................................... $(207,462) 61,845 $ (3.35) $ (60,018) 61,737 $ (0.97)
========= ======== ========= ========= ======== =========
</Table>
Consistent with SEC guidance, FFO has not been adjusted for the following
amounts included in net loss (in thousands):
<Table>
<Caption>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Impairment loss ................................. $(124,983) $(157,505) $(245,509) $(157,505)
Minority interest share of impairment loss ...... 1,770 -- 1,770 --
Charge-off of deferred debt costs ............... -- (3,222) (2,834) (3,222)
Gain on early extinguishment of debt ............ -- -- 1,611 --
Abandoned projects .............................. -- -- -- (1,663)
--------- --------- --------- ---------
$(123,213) $(160,727) $(244,962) $(162,390)
========= ========= ========= =========
Per share amounts ............................... $ (1.99) $ (2.60) $ (3.95) $ (2.63)
========= ========= ========= =========
</Table>
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 9
RECONCILIATION OF NET LOSS TO EBITDA
(in thousands)
<Table>
<Caption>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
NET LOSS ................................................. $(142,933) $(178,356) $(310,144) $(178,581)
Depreciation from continuing operations .............. 31,037 35,902 134,883 143,978
Depreciation from unconsolidated entities and
discontinued operations ........................... 2,153 5,699 15,152 20,455
Gain on sale of assets ............................... (3,444) -- (2,668) (5,861)
Minority interest in FelCor Lodging LP. .............. (7,712) (10,358) (17,777) (13,717)
Interest expense ..................................... 42,871 40,766 167,581 164,917
Interest expense from unconsolidated entities and
discontinued operations ........................... 1,294 2,743 7,563 10,884
Amortization expense ................................. 565 527 2,210 2,088
--------- --------- --------- ---------
EBITDA ................................................... $ (76,169) $(103,077) $ (3,200) $ 144,163
========= ========= ========= =========
</Table>
Consistent with SEC guidance, EBITDA has not been adjusted for the following
amounts included in net loss (in thousands):
<Table>
<Caption>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Impairment loss ................................. $(124,983) $(157,505) $(245,509) $(157,505)
Minority interest share of impairment loss ...... 1,770 -- 1,770 --
Charge-off of deferred debt costs ............... -- (3,222) (2,834) (3,222)
Gain on early extinguishment of debt ............ -- -- 1,611 --
Abandoned projects .............................. -- -- -- (1,663)
--------- --------- --------- ---------
$(123,213) $(160,727) $(244,962) $(162,390)
========= ========= ========= =========
</Table>
Historical cost accounting for real estate assets implicitly assumes
that the value of real estate assets diminish predictably over time. Since real
estate values instead have historically risen or fallen with market conditions,
most industry investors consider supplemental measurements of performance to be
helpful in evaluating a real estate company's operations. We consider Funds From
Operations, or FFO, and Earnings Before Interest, Taxes, Depreciation, and
Amortization, or EBITDA, to be supplemental measures of a REIT's performance and
should be considered along with, but not as an alternative to, net income as a
measure of our operating performance.
The White Paper on Funds From Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") defines FFO as net income or loss (computed in accordance with
generally accepted accounting principles), excluding gains or losses from sales
of property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect funds from operations
on the same basis. We believe that FFO and EBITDA are helpful to investors as a
supplemental measure of the performance of an equity REIT. We compute FFO in
accordance with standards established by NAREIT. This may not be comparable to
FFO reported by other REITs that do not define the term in accordance with the
current NAREIT definition, or that interpret the current NAREIT definition
differently than we do.
FFO and EBITDA should not be considered as an alternative to net
income, operating profit, cash flow from operations, or any other operating
performance measure prescribed by GAAP. Neither should FFO, FFO per share and
EBITDA be considered as a measure of our liquidity or indicative of funds
available for our cash needs, including our ability to make cash distributions.
FFO per share does not measure, and should not be used as a measure of amounts
that accrue directly to stockholders' benefit.
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 10
RECONCILIATION OF ESTIMATED NET LOSS TO ESTIMATED FFO AND EBITDA
(in millions, except per share and unit data)
<Table>
<Caption>
FULL YEAR 2004 GUIDANCE
---------------------------------------------------------
LOW GUIDANCE HIGH GUIDANCE
-------------------------- --------------------------
PER SHARE PER SHARE
DOLLARS AMOUNT(a) DOLLARS AMOUNT (a)
---------- ---------- ---------- ----------
NET LOSS .............................. $ (55) $ (0.93) $ (49) $ (0.83)
Depreciation ....................... 133 133
Preferred Dividends ................ (27) (27)
Minority interest in FelCor LP. .... (4) (4)
---------- ----------
FFO ................................... $ 47 $ 0.76 $ 53 $ 0.86
========== ==========
NET LOSS .............................. $ (55) $ (49)
Depreciation ....................... 133 133
Minority interest in FelCor LP. .... (4) (4)
Interest expense ................... 172 172
Amortization expense ............... 3 3
---------- ----------
EBITDA ................................ $ 249 $ 255
========== ==========
</Table>
(a) Weighted average shares are 58.9 million. Adding minority interest and
unvested restricted stock of 3.4 million shares to weighted average
shares, provides the weighted average shares and units of 62.3 million
used to compute FFO per share.
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FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 11
HOTEL OPERATING PROFIT
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31,
----------------------------- -----------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Total revenue ........................... $ 291,883 $ 291,986 $ 1,199,861 $ 1,242,185
Retail space rental and other revenue ... (148) (195) (1,022) (1,646)
----------- ----------- ----------- -----------
Hotel revenue ........................... 291,735 291,791 1,198,839 1,240,539
Hotel operating expenses ................ (218,444) (209,382) (852,494) (835,317)
----------- ----------- ----------- -----------
Hotel operating profit .................. $ 73,291 $ 82,409 $ 346,345 $ 405,222
=========== =========== =========== ===========
Operating margin ........................ 25.1% 28.2% 28.9% 32.7%
=========== =========== =========== ===========
</Table>
HOTEL OPERATING EXPENSE COMPOSITION
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------------- ----------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Hotel departmental expenses:
Room ...................................... $ 64,700 $ 60,156 $ 255,102 $ 249,120
Food and beverage ......................... 41,390 40,868 150,975 153,123
Other operating departments ............... 7,355 7,492 30,011 29,913
Other property related costs:
Administrative and general ................ 29,477 29,321 116,641 116,073
Marketing and advertising ................. 26,612 24,747 104,507 100,215
Repairs and maintenance ................... 18,381 16,841 69,171 65,274
Energy .................................... 15,207 14,742 62,974 58,249
----------- ----------- ----------- -----------
Total other property related costs ...... 89,677 85,651 353,293 339,811
Management and franchise fees ................ 15,322 15,215 63,113 63,350
----------- ----------- ----------- -----------
Hotel operating expenses ..................... $ 218,444 $ 209,382 $ 852,494 $ 835,317
=========== =========== =========== ===========
Reconciliation of total operating expense
to hotel operating expense:
Total operating expenses ..................... $ 281,853 $ 278,352 $ 1,126,971 $ 1,121,993
Taxes, insurance and lease expense ........ (28,564) (29,605) (125,328) (127,279)
Abandoned projects ........................ -- -- -- (1,663)
Corporate expenses ........................ (3,808) (3,463) (14,266) (13,756)
Depreciation .............................. (31,037) (35,902) (134,883) (143,978)
----------- ----------- ----------- -----------
Hotel operating expenses ..................... $ 218,444 $ 209,382 $ 852,494 $ 835,317
=========== =========== =========== ===========
</Table>
FelCor Lodging Trust 2003 Operating Results
February 4, 2004
Page 12
Hotel operating profit and operating margin are commonly used measures
of performance in the industry and give investors a more complete understanding
of the operating results over which FelCor's individual hotels and operating
managers have direct control. The Company believes that hotel operating profit
and operating margin is useful to investors by providing greater transparency
with respect to a significant measure used by management in its financial and
operational decision-making.
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